Financing Foreign Policy: UK Government–Bank Relations During the Development of the 1981–2 Sovereign Debt Crisis in Poland, Romania and Hungary

Through archival research, this article examines the relationship between the UK government, UK banks and the Bank of England during the development of the Central and Eastern European (CEE) sovereign debt crisis in Poland, Romania and Hungary. UK banks played a key role in the development of East–West relations during the Cold War through actively developing business ties with CEE countries. This article reveals that the UK government saw these relationships as a means to further its foreign policy goals towards the region and strengthen East–West European political and economic ties, which it sought to encourage through the use of export credit guarantees. It also illustrates how these foreign policy goals were the motivation for the UK government to encourage continued lending to Poland, Romania and Hungary during the outbreak of the CEE sovereign debt crisis through the Bank of England in its role as an intermediary between the government and banks. The article contributes to the underexplored role of export credit agencies, specifically the UK’s Export Credit Guarantee Department (ECGD), in the development of the sovereign debt crisis and demonstrates how UK banks helped finance the UK’s foreign policy toward CEE during the Cold War with the support and encouragement of the UK government.